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Abengoa Falls After Government Caps Tax Deductions: Madrid Mover

Abengoa Falls After Government Caps Tax Deductions
Over 600 solar troughs redirect the sun's rays to a central tower which heats water to generate steam to power turbines, at the Abengoa solar-thermal plant near Seville. Photographer: Markel Redondo/Bloomberg

April 2 (Bloomberg) -- Abengoa SA, a Spanish solar-power plant developer, dropped the most in almost two years after the government capped tax deductions on financial costs.

Abengoa fell as much as 10 percent, the biggest intraday drop since May 2010, and was 5.5 percent down at 12.94 euros as of 12:53 p.m. in Madrid. It was the worst performer on the benchmark IBEX 35 Index today.

The Spanish government pledged last week the deepest budget cuts in more than 30 years. As part of the measures, it will cap tax deductions on financial costs to 30 percent of earnings before interest, tax, depreciation and amortization. Previously, companies could deduct financial costs without limits.

“This is negative news for companies with a high level of debt, particularly for Abengoa,” Manuel Dias Coelho, an analyst at Banco BPI in Porto, Portugal, said by phone today. “Then you also need to take into account the great regulatory uncertainty within the renewable energy market, which is also having a negative impact.”

Spanish builders including Sacyr Vallehermoso SA and wind-energy companies such as Gamesa Corp. Tecnologica SA also fell in Madrid. Sacyr slid 3.5 percent to 2.20 euros and Gamesa lost 2.6 percent to 2.32 euros.

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net;

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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